Skip to content
All library documents

How Exchange Listing Differs from Trading in a Stock

Article Quant Q&A · Author: Myggen--
Read the original

Summary

The note distinguishes a stock’s listing venue from the places where its shares can be traded. A company lists its shares on an exchange subject to that venue’s eligibility and ongoing standards, while investors may trade the shares through other exchanges or off-exchange venues such as dark pools. Trades conducted elsewhere can still be reported so that market records reflect ownership changes.

The answers describe listing as a formal venue relationship involving registration and standards, whereas trading refers to secondary-market transactions. They also mention that a listing may affect a security’s credibility and cite a possible price premium associated with NYSE listings, based on studies of securities that changed venues. That claim is reported without study details, and the discussion does not fully explain the tape classification system raised in the question; venue rules and trading arrangements may also vary over time.

Key ideas

  • A stock’s listing exchange does not have to handle every trade in that stock.
  • Shares may trade on other exchanges or through off-exchange venues.
  • Listing entails meeting an exchange’s requirements and maintaining its standards.
  • The note mentions a possible listing-related price premium but provides no supporting study detail.

Tags

EquitiesUS marketsMarket microstructure
Full text
# What's the difference between a stock trading on an exchange and a stock being listed on an exchange?


# What's the difference between a stock trading on an exchange and a stock being listed on an exchange?












As I recently learnt, all U.S. stocks are part of either Tape A, Tape B or C. Stocks listed on the NYSE are on Tape A, NASDAQ-listed stocks are on Tape C and everything else is on Tape B.

Of course, if a stock is listed on some exchange, one can trade the stock there. However, many stocks are traded on multiple exchanges. In this case, how does one determine where the stock is listed? Is it based on the exchange where it first started trading? What if the stock is traded on multiple exchanges right after its IPO?

## Answer by demully (score 1, accepted)

https://quant.stackexchange.com/a/60102

Hi and welcome Myggen,

All stocks have to be listed on an exchange, but that does not mean that all trading in that stock has to be conducted via that exchange's order book. There are numerous "dark pools" of liquidity, often operated by investment bank trading departments that allow investors to trade stocks outside of the exchange. The pools simply tell the exchange what trades have been made; so the exchange can update its records about who owns what. But the trade need not happen on the NYSE or NASDAQ's trading platform itself.

Given this information, the NYSE and the NASDAQ can then provide reliable trading data on "their" stocks, even if the minority of actual trading was ever conducted through their own trading platforms.

The "listing" itself is more just (1) a register of legal ownership, and (2) a club membership that forces corporates to abide by basic standards and accepted rules of behaviour if it wants its stock to remain tradeable, given that it has gone public.

## Answer by Bikenfly (score 2)

https://quant.stackexchange.com/a/60090

A so-so analogy. Being listed on an exchange is like buying a new car from a dealer associated w the manufacturer, i.e. buying a new Chevy from a Chevy dealer. Trading on an exchange is like buying from a used car dealer, a lot more places to go, and they transact in pre-existing securities. "Used" securities that are already trading in the secondary market may also choose to be listed on an exchange. This is done to add credibility. Typically NYSE listed securities trade at a wee bit of a premium to those listed on other markets (based on studies of securities that have migrated their listing to Nasdaq from NYSE and vice-versa).

Unrelated but an exchange that accepts listings has minimum eligibility criteria, like for NYSE. An exchange that permits trading in securities listed elsewhere may have standards. Also, check out https://www.investor.gov/introduction-investing/investing-basics/glossary/listing-standards

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.